You don’t need to follow music industry news particularly closely to hear about contractual disagreements between artists and labels. Prince famously appeared in public with ‘Slave’ painted on his forehead. Michael Jackson, Oasis, Dr Dre and Radiohead have all suffered fallouts over royalties and rights. There are just too many cases to name, and those are just the high-profile ones. We examine why and how a blockchain-enabled peer-to-peer database of music could slowly begin the process of reforming the way musicians and industry players, both large and small, are paid for their work.
The problem for artists
There’s a long food chain which exists between those who make the music and those who pay for it – fans, concert goers, sponsors and advertising firms. Somewhere along the way are those who rely on income from music sales and deals to run their business – publishers, producers, licensing agencies, digital distributors and many others. Every link in the chain takes a large or small cut of the earnings from a release, with the remainder reaching the musicians, usually last, up to 18 months later. The amount that reaches the artist through sales has decreased pretty dramatically over the past 50 years. About as dramatically as the number of those who call themselves artists has increased.
Receivers of royalties in today’s world of centralized and private streaming services and publishers would have been far better off selling a million copies of an album in the 1960s than they are today. The trend of music creation and consumption has been greatly amplified, and with that has come complexity.
The problem for artists is that this long list of in-betweeners is inhibiting their relationships with their own fans, costing them too much time and money and is apparently shrouded in secrecy. Nobody knows exactly what every link in the chain is earning, but some estimates believe that for every dollar an artist profits, a label profits 4. The recorded music industry in the USA brings in at least $15bn, most of it attributed to streaming service subscription. The money is there. It’s just not all making it to the creators of the music fairly and on time.
Time for an alternative
There has probably never been a more fruitful time for artists to look for alternatives to both major label signing and the uphill, competitive battle for relevance and streaming revenue. These two points – making a deal with a big cigar-smoking exec and slaving away on obtaining Facebook likes for your bedroom band – represent the two extremes of the scale. Naturally, from the artists’ perspectives, a considerable amount of value is lost to the inevitability of corporate profiteering. Artists write, businesses sell.
Neither has historically been very good at doing both. The resulting situation? Every way artists turn, there is some intermediary offering them the ability to connect with potential fans of their work, either for prohibitively exploitative percentages, upfront fees, tour booking buy-ins or ‘death by a thousand cuts’ in the form of a $20 distribution fee for every cover song released. These processes do not require teams of staff members and boardrooms of human decision-makers anymore.
The time appears to have come for whole creative industries – not just music – to collaborate in order to create a system that provides fair distribution of total value to everyone in the food chain, from consumer to artist to publisher, if any. Blockchain technology offers a potential alleviation of this problem, if not permanent eradication. The decentralized nature of the records allow data to be irrefutably and securely stored and transferred between individuals. Smart Contracts enable deals to be made without having to pay intermediary experts to serve as trustworthy middlemen.
How it works
Artists are currently able to upload their intellectual property to a growing number of blockchain-based platforms. Check out some of the work I’ve done researching Choon, Resonate, Feedbands, Ujo and During the process, they include meta information such as lyrics, cover art, liner notes, licensing info and the audio or video itself. This data is all linked together in a ‘smart contract’. A smart contract is a piece of code that allows data to be acted on under certain circumstances.
For example, when a song is played on a blockchain-enabled streaming service, the artist might receive a royalty immediately, or a notification on their phone that their music is currently being played at a hotel in Buenos Aires. Besides the actual percentage split, this data is key for an artist to grow their own fanbase. Smart contracts are templates which allow the user to set their own terms of service for the usage of the work to enable fans, distributors and licensees alike to submit revenue directly to the artist and their collaborators and promoters. Two important things here: the artist sets the terms, and the transactions are transparent. With far less paperwork.
During such instances, all parties involved in the creation and publishing work would be able to clearly see the transactions associated with the work. The complex rights surrounding playback in restaurants, bars and hotels (also known as ‘performance rights’) and synchronization to visual media (‘sync rights’) would ensure that the amount paid was transparent and in accordance with agreed the proportion of revenues. No opacity in the accounting process, no 18-month delay in royalty payment, and total clarity over who controls which rights to the work, with the artist themselves serving as the main decision-maker for the distribution of the total value of the work.
Why it works (in theory)
The power of blockchain-enabled platforms is the inter-operability of modern devices to create a network of consensus and trust. Blockchain platforms are able to run on thousands of different types of devices simultaneously – those of the users or ‘nodes’ – instead of on the servers of private companies, subject to the costs and legalities of running a centralized enterprise. Using blockchain technology enables anyone with access to a connection to store and transfer money, music, metadata and anything else of value privately and securely. Instead of placing trust in the current list of intermediaries (record labels, streaming services, credit card services, even lawyers), artists would be able to have their payments verified by the very network of nodes itself.
Unlike a centralized publishing institution, a peer-to-peer blockchain network successfully and mathematically leverages the cooperation of those running the software on their devices against security threats. As long as the majority of end users understand and cooperate with the system, and miners seek to make a profit rather than a loss, blockchain technology is built to be impenetrable to corruption.
What else could it do?
New opportunities for business inevitably arise when the value of the product is both related to the market and clear to the buyer up front. Besides secure, private and transparent transactions that protect the intellectual property of artists, blockchain technology promises a revitalization of many types of industries and the introduction of a whole new marketplace for creative work and services to thrive. The ideal end result would be the public distribution of all musical information about all music ever recorded in a distributed network of personal computers – the blockchain. The bureaucracy of big organizations could be bypassed, skill sets could be openly communicated and collaborators – from commissioners of new works to event bookers, tour managers and musicians – could be made far easier to contact and secure.
The overarching benefit to adopting blockchain technology is that it holds the potential for the artist to dictate the terms of the publishing of their music. While the technology is quickly being co-opted by major labels and other parties culpable in the exploitation of artists, the possibility of tomorrow’s artists controlling the flow of their own financial transactions is too promising to be left unexamined.
What’s the catch?
The catch is that it’s still early enough that blockchain knowledge hasn’t yet filtered upwards and outwards to fans. Google ‘blockchain’ and you’ll get a million results about Bitcoin. There’s still confusion over how the software works by those who problematically equate blockchain with Bitcoin. And of course, there’s still a great deal of reluctance for everyone involved to adapt to the changes. Is it critical to the development of the music industry? Not right now. There’s still no massive incentive for a fan to switch from large, fairly affordable catalogues of music like Spotify and Apple Music to a beta streaming service like Choon, which offers far fewer artists, no option to interact or comment on songs and crypto-only financial transactions. For now.
But blockchain still remains the 2018 buzzword of the world’s biggest music conferences for a reason. Choon’s public token sale took place as recently as July 2nd of this year. In his address at The Next Web’s 2018 Conference in May, Pledge Music founder Benji Rogers backed blockchain software to change the way artists interact with their fans in a permanent way. “We cannot build a modern music industry on top of faxes, emails and phone calls,” he stated. “There’s something more powerful than all the armies in the world, and that’s an idea whose time has come.”